Governor’s income tax plan likely to dominate session

Jeremy AlfordCapitol Correspondent

Published: Monday, January 21, 2013 at 10:33 a.m.

Last Modified: Monday, January 21, 2013 at 10:33 a.m.

BATON ROUGE — Gov. Bobby Jindal’s plan to eliminate income taxes in exchange for greater sales taxes will be an overpowering force when the Legislature’s regular session convenes April 8, and it will probably continue to be long after lawmakers adjourn.

Despite the lofty political agenda, the Legislature and administration also must wrestle with a $1.2 billion budget deficit this spring, which has been worsened by a string of previous shortfalls that triggered earlier midyear cuts and sweeping reductions.

After freezing state money to public schools four years in a row, cutting off public medical facilities from state aid and reducing the government payroll, among other cost-saving measures from recent years, members of the Terrebonne-Lafourche delegation said they are uncertain how additional slashing will play out.

Sen. Norby Chabert, R-Houma, said it is important to remember Jindal’s tax plan is intended to be revenue neutral, meaning the changes should not tip the fiscal scales one way or another in terms of the tax monies being collected and applied to the state budget.

“A lot of people are wondering how the state is going to make this work,” said Chabert, vice chairman of the Senate Finance Committee. “I think there’s a lot on the table right now and they’re listening to what people are saying. They’re kind of licking a finger and sticking it in the air.”

A final tax plan is expected sometime in March, but the administration has already vowed that property taxes are off the table, as are the sales tax exemptions for food, residential utilities, medicine and energy-related activities.

Jindal’s team has been receptive to increasing taxes on cigarettes and even suggested earlier this month creating a special earned income tax credit — a means for an individual to keep more of the money he or she makes — to help lower-income taxpayers adapt to the changes.

Revenue Secretary Tim Barfield said this past week the administration is likewise tracking federal legislation that would allow states to tax online sales.

According to a University of Tennessee study, Louisiana probably lost out on more than $440 million in online sales taxes in 2012.

The most high-profile instrument on Capitol Hill to reverse that trend is the Marketplace Fairness Act, which was introduced and stalled in the Senate last year.

Daniel Patrick Head, press secretary for U.S. Sen. Michael B. Enzi, a Wyoming Republican, said Enzi will be rebooting the bill for the new Congress but couldn’t offer a timeline or specifics.

As originally introduced, it would allow the states to tax online purchases but also exempt small businesses with less than $500,000 in annual revenues from out-of-state sales.

Both U.S. Sens. Mary Landrieu, a New Orleans Democrat, and David Vitter, a Metairie Republican, said they are tracking all of the federal sales tax proposals and are waiting for something to gain traction.

Moreover, longtime congressional staffers anticipate the state could be waiting a while on federal legislation since the issue does not seem to be taking shape as any kind of policy priority in the Senate.

On another front, there is the chance — a good one, state lawmakers predict — that Jindal will move forward with a repeal or phase out of existing sales tax exemptions, of which there are nearly 200 on the books.

These sales tax breaks come in the form of exclusions, exemptions, alternate reporting methods, credits and refunds.

They affect a wide spectrum of professions ranging from physicians and newspaper publishers to blind entrepreneurs and Bible salesmen.

It is such a wide net that Dan Juneau, outgoing Louisiana Association of Business s and Industry president, is cautioning that the upcoming tax debate “won’t be for the faint of heart.”

Some of the current exemptions are very local in nature, like a break on radiation therapy purchases made by OncoLogics in Lafayette, while others have a wider appeal, like the Annual Louisiana Sales Tax Holiday, which is held during the first weekend of August and applied to “most individual items of tangible personal property.”

Other sales tax breaks that could potentially find themselves on the cutting room floor during the coming session include:

Machinery and equipment that produce news publications and radio broadcasts.

Room rentals at camps and retreat facilities owned by nonprofits.

Bible purchases by churches and synagogues.

Sales through coin-operated vending machines.

Purchases of school buses by independent operators.

Sales of telephone directories by advertising companies.

Sales of cellular telephones and electronic accessories.

Coin bullion with a value of $1,000 or more.

Fees paid by radio and television broadcasters for the rights to broadcast film, video and tapes.

Seed for planting crops.

Sales or purchases by blind persons operating small businesses.

Cable installation and repair services.

Specialty Mardi Gras items purchased by krewes.

Sales of polyroll tubing.

While special interests have been slow to take sides on Jindal’s developing plan, the idea of increasing sales taxes has brought about cries of concern from parish and municipal agencies that rely on sales taxes. They would, in theory, be in a poor position to request future increases if the state hikes its own.

Retailers have also said they are worried about stores near the state border competing against Texas, Arkansas and Mississippi businesses with lower tax rates.

Tourism and visitors professionals have argued the same, pointing to local sales taxes on hotels and competition from neighboring states.

In building a defense for the administration’s plan, the Revenue Department has issued a set of “facts and figures’” beginning with a multi-sourced declaration that the sales tax is a “more stable form of revenue compared to the personal income tax” and better for economic growth.

In a report released last week, the Tax Advisory Group formed by the Baton Rouge-based Public Affairs Research Council offered a cautious take on those findings.

“A repeal of the individual income tax could create a more attractive perception of the state’s tax climate but such a move runs the risk of destabilizing the state’s revenue base and would likely set the stage for increased taxes in the future,” according to the report. “Some states without an individual income tax have high property taxes or extraordinary revenues from energy or tourism and therefore may not provide a comparable example of the governor’s proposal.”

The Revenue Department’s “Know the Facts: Sales Taxes and Income Taxes” countered that eliminating the personal income tax would create a business climate that encourages more business investment and jobs.

It also stated that sales taxes grow with the economy when compared to other sources of revenue during economic downturns, resulting in more money as the need arises.

<p>BATON ROUGE — Gov. Bobby Jindal's plan to eliminate income taxes in exchange for greater sales taxes will be an overpowering force when the Legislature's regular session convenes April 8, and it will probably continue to be long after lawmakers adjourn. </p><p>Despite the lofty political agenda, the Legislature and administration also must wrestle with a $1.2 billion budget deficit this spring, which has been worsened by a string of previous shortfalls that triggered earlier midyear cuts and sweeping reductions. </p><p>After freezing state money to public schools four years in a row, cutting off public medical facilities from state aid and reducing the government payroll, among other cost-saving measures from recent years, members of the Terrebonne-Lafourche delegation said they are uncertain how additional slashing will play out. </p><p>Sen. Norby Chabert, R-Houma, said it is important to remember Jindal's tax plan is intended to be revenue neutral, meaning the changes should not tip the fiscal scales one way or another in terms of the tax monies being collected and applied to the state budget. </p><p>“A lot of people are wondering how the state is going to make this work,” said Chabert, vice chairman of the Senate Finance Committee. “I think there's a lot on the table right now and they're listening to what people are saying. They're kind of licking a finger and sticking it in the air.”</p><p>A final tax plan is expected sometime in March, but the administration has already vowed that property taxes are off the table, as are the sales tax exemptions for food, residential utilities, medicine and energy-related activities. </p><p>Jindal's team has been receptive to increasing taxes on cigarettes and even suggested earlier this month creating a special earned income tax credit — a means for an individual to keep more of the money he or she makes — to help lower-income taxpayers adapt to the changes. </p><p>Revenue Secretary Tim Barfield said this past week the administration is likewise tracking federal legislation that would allow states to tax online sales. </p><p>According to a University of Tennessee study, Louisiana probably lost out on more than $440 million in online sales taxes in 2012.</p><p>The most high-profile instrument on Capitol Hill to reverse that trend is the Marketplace Fairness Act, which was introduced and stalled in the Senate last year. </p><p>Daniel Patrick Head, press secretary for U.S. Sen. Michael B. Enzi, a Wyoming Republican, said Enzi will be rebooting the bill for the new Congress but couldn't offer a timeline or specifics. </p><p>As originally introduced, it would allow the states to tax online purchases but also exempt small businesses with less than $500,000 in annual revenues from out-of-state sales. </p><p>Both U.S. Sens. Mary Landrieu, a New Orleans Democrat, and David Vitter, a Metairie Republican, said they are tracking all of the federal sales tax proposals and are waiting for something to gain traction. </p><p>Moreover, longtime congressional staffers anticipate the state could be waiting a while on federal legislation since the issue does not seem to be taking shape as any kind of policy priority in the Senate. </p><p>On another front, there is the chance — a good one, state lawmakers predict — that Jindal will move forward with a repeal or phase out of existing sales tax exemptions, of which there are nearly 200 on the books. </p><p>These sales tax breaks come in the form of exclusions, exemptions, alternate reporting methods, credits and refunds.</p><p>They affect a wide spectrum of professions ranging from physicians and newspaper publishers to blind entrepreneurs and Bible salesmen. </p><p>It is such a wide net that Dan Juneau, outgoing Louisiana Association of Business s and Industry president, is cautioning that the upcoming tax debate “won't be for the faint of heart.”</p><p>Some of the current exemptions are very local in nature, like a break on radiation therapy purchases made by OncoLogics in Lafayette, while others have a wider appeal, like the Annual Louisiana Sales Tax Holiday, which is held during the first weekend of August and applied to “most individual items of tangible personal property.”</p><p>Other sales tax breaks that could potentially find themselves on the cutting room floor during the coming session include:</p><p><ul><li>Purchases by offtrack wagering facilities and horses claimed in Louisiana races.</li></p><p><li>Machinery and equipment that produce news publications and radio broadcasts.</li></p><p><li>Room rentals at camps and retreat facilities owned by nonprofits.</li></p><p><li>Bible purchases by churches and synagogues.</li></p><p><li>Sales through coin-operated vending machines.</li></p><p><li>Purchases of school buses by independent operators.</li></p><p><li>Sales of telephone directories by advertising companies.</li></p><p><li>Sales of cellular telephones and electronic accessories.</li></p><p><li>Coin bullion with a value of $1,000 or more.</li></p><p><li>Fees paid by radio and television broadcasters for the rights to broadcast film, video and tapes.</li></p><p><li>Seed for planting crops.</li></p><p><li>Sales or purchases by blind persons operating small businesses.</li></p><p><li>Cable installation and repair services.</li></p><p><li>Specialty Mardi Gras items purchased by krewes.</li></p><p><li>Sales of polyroll tubing.</li></p><p>While special interests have been slow to take sides on Jindal's developing plan, the idea of increasing sales taxes has brought about cries of concern from parish and municipal agencies that rely on sales taxes. They would, in theory, be in a poor position to request future increases if the state hikes its own.</p><p>Retailers have also said they are worried about stores near the state border competing against Texas, Arkansas and Mississippi businesses with lower tax rates. </p><p>Tourism and visitors professionals have argued the same, pointing to local sales taxes on hotels and competition from neighboring states. </p><p>In building a defense for the administration's plan, the Revenue Department has issued a set of “facts and figures'” beginning with a multi-sourced declaration that the sales tax is a “more stable form of revenue compared to the personal income tax” and better for economic growth. </p><p>In a report released last week, the Tax Advisory Group formed by the Baton Rouge-based Public Affairs Research Council offered a cautious take on those findings.</p><p>“A repeal of the individual income tax could create a more attractive perception of the state's tax climate but such a move runs the risk of destabilizing the state's revenue base and would likely set the stage for increased taxes in the future,” according to the report. “Some states without an individual income tax have high property taxes or extraordinary revenues from energy or tourism and therefore may not provide a comparable example of the governor's proposal.”</p><p>The Revenue Department's “Know the Facts: Sales Taxes and Income Taxes” countered that eliminating the personal income tax would create a business climate that encourages more business investment and jobs.</p><p>It also stated that sales taxes grow with the economy when compared to other sources of revenue during economic downturns, resulting in more money as the need arises.</p>